- Waylon Wilcox hid $13M in income from 97 CryptoPunks transactions in 2021-2022.
- He avoided paying $3.2M in taxes, prompting IRS investigation.
- CryptoPunks, once valued at $479K, now trade for about $69K each.
A Pennsylvania man faces up to six years in prison after asserting guilty to filing false tax returns. The case stems from his failure to report millions of dollars in income generated from the sale of CryptoPunks NFTs. Waylon Wilcox, 45, admitted in federal court on April 9 that he had concealed more than $13 million in income from 97 CryptoPunks transactions during 2021 and 2022. As a result, he evaded paying over $3.2 million in taxes.
CryptoPunks Transactions and the False Tax Returns
Wilcox sold a substantial number of CryptoPunks during the two-year period. In 2021, he sold 62 CryptoPunks, generating $7.4 million in sales. Another 35 NFTs were sold in 2022, bringing in nearly $4.9 million. However, on both of his tax returns for these years, Wilcox falsely claimed that he had not disposed of any digital assets, according to court documents. The failure to report these transactions on his tax filings authorized him to reduce his taxable income.
As a result, he avoided paying $2.18 million in taxes in 2021 and $1.09 million in 2022. Wilcox’s actions drew the attention of the Internal Revenue Service, which subsequently established research. CryptoPunks are part of a 10,000-piece pack of algorithmically induced pixel art characters. They became one of the most valuable and sought-after NFT clusters during the boom in digital collectibles in 2021 and 2022. At their rise, some CryptoPunks sold for as much as $479,000.
Although the collection has significantly dropped in value since then, with the current floor price of a CryptoPunk standing at just under $69,000, Wilcox’s sales still involved millions of dollars in transactions. Despite this drop, the NFT market remains a highly lucrative space for digital assets. The legal implications of not properly reporting NFT transactions underscore the importance of complying with tax regulations.
IRS Cracks Down on Digital Asset Tax Evasion
According to the U.S. Attorney’s Office for the Middle District of Pennsylvania, digital asset investigations represent a rising trend in IRS enforcement activities. The Philadelphia Field Office’s Special Agent in Charge Yury Kruty stated through a statement how IRS Criminal Investigation remains committed to finding sophisticated fraudulent activities involving virtual currencies and NFTs.
Kruty stressed the necessity of transparency in the crypto space and the importance of ensuring that taxpayers comply with tax laws. The IRS has issued clear guidelines on the reporting of NFT sales and any resulting gains or losses. The maximum prison term Wilcox might face amounts to six years at the federal level. An additional consequence of being convicted under federal tax laws would include supervised release and monetary fines to the offender.
The situation shows how important it is for crypto and NFT market participants to accurately report their taxes because this case acts as a warning. Regulatory authorities demonstrate growing attention to cryptocurrency and NFT fields due to this case. Both investors and regulatory bodies will maintain proper tax compliance focus as digital assets maintain their increasing popularity.
